Statements made by Alexey Dobrynin to the article ‘Sanctions Are Reserved for Children’. Kommersant, 21 November 2018
What problems will face the heirs of Russian citizens who are on the American lists?
Heirs to the persons named in the US sanctions list ‘will inevitably face difficulties in transfer’ of the rights to the assets and property of their parents in America, the Pen & Paper report says. To dispose of the frozen assets, it will be necessary to exclude the deceased person from the list. This procedure can take years, the study notes.
According to Anton Ivanov, an analytic report by lawyer of the Pen & Paper, an expert on sanction law, children of the Russian political and business figures exposed to the US sanctions, ‘will inevitably face difficulties in exercising their rights’ when inheriting their parents’ American assets,. ‘The issue of inheritance of sanctions, as well as of the property of the sub-sanctioned persons, has not been investigated before,’ he explained to ‘Kommersant.’ ‘Many have not yet realized that sanctions can affect not only the business or business partners of a particular person, but also their personal property and their heirs.’ As it was calculated at Pen & Paper, at least 77 persons named in the American list have children (there are almost 700 Russian citizens and companies are sanctioned by the US).
The sanction list (SDN-list; Specially Designated Nationals) includes no subjects’ relatives, the report says, but ‘extending the sanctions regime to families and close relatives of the sanctioned persons can be beneficial for the United States,’ especially ‘when those who fall under sanctions have frozen assets in America.’ For example, ‘Oleg Deripaska experienced the effect of the sanction regime in relation to his apartment in Manhattan’: the US authorities have frozen his assets, and he, among other things, cannot manage mansions in New York or Washington, the New York Post wrote in October. From the decrees of the President of the United States and the acts of the American Treasury, it follows that for the persons named in the sanctions list, ‘all assets and rights to the assets located in the United States have been frozen and cannot be transferred, paid for, exported, withdrawn or otherwise disposed of.’ When inheriting such property without its ‘being cleared’ of the restrictions imposed by the sanction acts, including registration, any actions with regard to such assets will be impossible,’ the report says.
Sanctions acts ‘do not provide for a procedure for releasing assets of the persons who are on the sanctions list, frozen in the United States,’ but nevertheless ‘such an opportunity cannot be excluded,’ experts say. The Treasury’s official website ‘provides some examples of situations that may serve as grounds for exclusion from the sanctions list: ‘A positive change in the behavior of a listed person, the death of such a person, the basis for inclusion in the list no longer exists, the listing is based on an erroneous information’. That is, the death ‘not always, but sometimes’ can be the basis for the Office of Foreign Assets Control (OFAC) to decide on exclusion of a person from the list, the study indicates. For this, the heirs will need to submit an application to OFAC, where a written decision is to be provided ‘after the audit’. However, ‘in practice, the delisting procedure takes a very long time,’ the report says: ‘For example, Shamil Basayev (a Chechen terrorist – ‘Kommersant’) was on the sanctions list for five years after his death. The Cubans, included in the list back in the 80s of the last century and long dead, were excluded by OFAC only in 2015’. Challenging an SDN-list through courts ‘is an even more complicated and costly process,’ said Anton Imennov.
Another option to transfer the inheritance to the person named in the SDN-list is a will for succession to foreign property. If a sanctioned person resides in the territory of the Russian Federation, he or she has the opportunity to draw out the will, however, ‘the option is not excluded that such a transaction will not be authorized by the US competent authorities due to the fact that any transactions in respect of frozen assets are prohibited’. ‘Persons likely to be sanctioned should take measures without delay to transfer their free foreign assets to their relatives or proxies,’ summarizes Anton Imennov.
Washington adopted the first sanctions list for individuals in March 2014, a couple of days after the annexation of the Crimea. Eleven people lost their right to enter the United States, including presidential aide Vladislav Surkov, Speaker of the Federation Council Valentina Matvienko and Deputy Prime Minister Dmitry Rogozin. It was reported that their property and accounts in the United States, ‘if any,’ were subject to freezing. Since then, the number of individuals in the sanctions list has grown to almost 200 people. Among them are Sergei Ivanov, the former head of the presidential administration of the Russian Federation, Vladimir Yakunin, the former head of Russian Railways, and businessmen Gennady Timchenko, Arkady Rotenberg and Boris Rotenberg, Yevgeny Prigozhin. The reasons for expanding the list were different: first, there was a discussion about participation in the annexation of the Crimea and destabilization of the situation in the east of Ukraine, then they were charged with interfering in the presidential elections in the US, and since yesterday – assistance in oil supply to the Syrian government.
If children of the Russians listed in the SDN try to dispose of the American property, they ‘will violate the American sanctions regime,’ says lawyer Artem Zhavoronkov. Heirs may also be liable to a fine ‘up to $1 million for each violation, and to personal inclusion on the sanctions list,’ he notes. Aleksey Panich, a partner of Herbert Smith Freehills, says that the main problem for the heirs is the unfreezing assets, ‘because it will take time to clarify all the circumstances – at least to determine whether this property will not belong to the person from the SDN again’.
Aleksey Dobrynin, partner, head of the attorneys at law Pen & Paper criminal-legal practice
Natalia Korchenkova, Andrei Paradise, Galina Dudina